This unorthodox business invests in songwriter royalties like they’re financial instruments

An unorthodox investor named Merck Mercuriadis raised $1B to build a fund that buys the publishing rights to pop songwriters’ work as if they were stocks.

January 13, 2020

Photo: Jill Furmanovsky/rockarchive (via WIkipedia)

In the past 3 years the Hipgnosis Songs Fund has purchased the licensing rights to almost 7.5k pop songs — including more than 1k #1 hits.

But, as writer Matt Hendrickson reports, Hipgnosis founder Merck Mercuriadis has bigger plans: Ultimately, he hopes to own as much as 20% of the music publishing market — and Hipgnosis has already raised nearly $1B to do it.

It’s all about the royalties

To understand Hipgnosis’ business model, it’s important to understand music royalties. 

First off, there are 2 types: artist royalties and songwriter royalties. When Ariana Grande (artist) releases a song that’s written by Savan Kotecha (songwriter), they both get a cut of the song’s earnings.

Artist royalties are a big business (see: the feud of Taylor Swift v. Scooter Braun). But so are songwriter royalties… 

And that’s where Hipgnosis comes in

Hipgnosis has bought up the catalogs of songwriters who have written songs for artists ranging from Bruno Mars to the Eurythmics, often paying top dollar to price out competitors.

Unlike other music publishers who invest in developing their songwriters’ talent, Hipgnosis only invests in songs that are already hits… and that it can count on to deliver a reliable return on their investment.

It’s been a winning strategy: Hipgnosis stock prices rose 10% in its first year of trading (2018) — and last year the company’s profit increased from $4m to $15.5m in 6 months.

So, what do other, more old-school publishing execs have to say about  Mr. M?

According to Hendrickson, they say: “F*ck that guy.”

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